Pakistan to leave 21 percent policy rate unchanged amid high inflation -analysts

A foreign currency dealer counts currency bills at a shop in Karachi on February 25, 2022. (AFP/File)
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Updated 08 June 2023

Pakistan to leave 21 percent policy rate unchanged amid high inflation -analysts

  • Pakistan’s key rate has been raised by a massive 1125 basis points (bps) since April of last year 
  • Most analysts say there would be no change in key rate next week, while one expects a 100 bps hike

KARACHI: Pakistan’s central bank is widely expected to keep its key interest rate unchanged at 21 percent on Monday after aggressive rate hikes since April last year to tackle record-high inflation amid the nation’s worst-ever economic crisis. 
The country’s key rate has been raised by a massive 1125 basis points (bps) since April 2022 and 17 of 18 analysts surveyed said there would be no change in the key rate on Monday, while one expects a 100 bps hike. 

“They’ll point to a ‘plateauing of inflation’ as evidence that rates don’t need to go up,” said Uzair Younus, Director of the Pakistan Initiative at the Atlantic Council’s South Asia Center. 

Most analysts agreed that with inflation peaking and global commodity prices coming down, there was no urgent need to hike interest rates yet again. Inflation surged to 37.97 percent in May, a record high for the second month in a row, and the highest in South Asia, ahead of Sri Lanka, which posted annual inflation of 25.2 percent in May. 

“The inflation readings are expected to fall due to high base effect,” said Fahad Rauf, head of research at Ismail Iqbal Securities. “We expect 30 percent inflation for June 2023 vs 38 percent in May. GDP growth was meager 0.3 percent, which would probably be revised to negative once the final/revised GDP numbers are released next year,” he added. 

But Shivaan Tandon, an economist at Capital Economics, expects a 100 bps hike, saying the central bank cannot afford the luxury of keeping the policy rate on hold given the need to tame record-high inflation and support the currency through monetary tightening. 

“Rate hikes may also prove to be a signal to potential creditors about the authorities’ commitment toward resolving external imbalances,” he said.

The policy decision will follow the annual budget that will be presented to parliament on Friday. The government will hope to strike a balance between reforms to satisfy the International Monetary Fund (IMF) and measures to win over voters in an imminent election due by November. 

The cash-strapped country, with reserves to barely meet a month’s worth of imports, is undertaking steps to secure a $1.1 billion loan, part of a $6.5 billion IMF bailout package. These measures include raising taxes and removing blanket subsidies and artificial curbs on the exchange rate.

Pakistan mulling army crackdown against electricity theft, line losses in distribution companies — official

Updated 5 sec ago

Pakistan mulling army crackdown against electricity theft, line losses in distribution companies — official

  • Power secretary says plan to bring in army will begin with Hyderabad Electric Supply Company as a pilot project
  • Energy Minister Mohammad Ali had said in September a crackdown would start to stop power theft of $1.92 billion

ISLAMABAD: The government has “carved out a plan” to involve the army in a crackdown against electricity theft and line losses of state-run power distribution companies, the federal secretary of the power division said in an interview to a top Pakistani newspaper published on Thursday. 

The South Asian nation’s power sector has been plagued by high rates of power theft and distribution losses, resulting in accumulating debts across the production chain — a concern also raised by the International Monetary Fund (IMF) during recent bailout talks.

There are ten distribution companies in Pakistan, which are locally called DISCOs. The high performing ones, with high recovery of bills, are based in the major eastern urban centers of Gujranwala and Faislabad, as well as in the capital, Islamabad, but other state-run companies make massive losses because of low recovery rates due to theft and line losses. 

The caretaker energy minister Mohammad Ali had said in September a crackdown would start to stop power theft of 589 billion rupees ($1.92 billion).

“We have carved out a plan which is yet to be approved by higher authorities. However, the top functionaries of Power Division have made up their minds to start implementing the plan from HESCO (Hyderabad Electric Supply Company) as a pilot project,” Secretary of the Power division Rasheed Langrial told The News, one of Pakistan’s top English newspapers, referring to plans for the army to supervise a crackdown against electricity theft and distribution losses. 

“This will help identify unscrupulous elements within the DISCO and people hand in glove with theft of electricity and causing billions of rupee losses to national exchequer.”

The army has not yet commented on Langrial’s remarks but the news comes after a crackdown on dollar hoarding and smuggling that has led to a continuing appreciation of Pakistan’s national currency and which currency dealers have widely credited the country’s all-powerful army of spearheading. Tens of millions of dollars have poured back into Pakistan’s interbank and open markets since raids on black market operators began on Sept. 6.

While there have been other attempts to curb the black market when the rupee has been under stress, the latest push came after licensed dealers requested army chief General Asim Munir to take action, rather than leave it solely to the civilian caretaker government that was put in place in August to run Pakistan till elections, currently expected to be held early next year. Munir had reportedly promised dealers “transparency in dollar exchange and interbank rates.”

According to the data for the financial year 2020-21 quoted in The News, the recovery of electricity bills in HESCO was at 73.7 percent, Sukkur Electric Supply Company 64.6 percent, Quetta Electric Supply Company at 34.66 percent and Tribal Electric Supply Company at 25.29 percent.

Pakistan’s resolve to undertake power sector reforms was crucial to reaching a staff level agreement unlocking a $3 billion standby arrangement from the IMF earlier this year.

The power sector has been specifically mentioned by the IMF, which called for a “timely” rebasing of tariffs to ensure that costs are recovered. This means hiking prices for consumers despite already record high inflation.

Pakistan polls regulator to unveil final constituency list today, rejects ‘rumors’ of election delay

Updated 30 November 2023

Pakistan polls regulator to unveil final constituency list today, rejects ‘rumors’ of election delay

  • Says will approach media regulator against those spreading false news
  • Election Commission has announced vote would take place on Feb. 8

ISLAMABAD: Pakistan’s main election oversight body has rejected “rumors” of a delay in general elections, and plans to release the final list of constituencies today, Thursday, state-media said. 

The Election Commission of Pakistan announced earlier this month the vote, originally expected in November and then scheduled for the last week of January, would instead take place on Feb. 8, a date chosen following consultations with the country’s President Dr. Arif Alvi that were requested by the Supreme Court.

“Election Commission has decided to approach PEMRA against those spreading such false news [of election delay] so that legal action can be taken against those spreading such misleading news,” the ECP said in a statement, referring to the electronic media regulator.

“The news that election lists have not been prepared is completely false.”

Pakistan’s state news agency APP reported that the ECP would release “the final list of constituencies based on the 7th Population and Housing Census 2023 on Thursday, earlier than initially planned.”

“Objections concerning the new constituencies for the national and four provincial assemblies were deliberated and concluded on November 22,” APP reported.

Pakistan’s parliament was dissolved by the president on then Prime Minister Shehbaz Sharif’s advice on Aug. 9, setting the stage for a national election amid political and economic crises. A caretaker administration subsequently took over with the constitutional mandate to hold new elections in 90 days.

However, as the outgoing Sharif government had approved the results of a new census in August, the election commission was constitutionally bound to redraw hundreds of new constituency boundaries based on the fresh population count, delaying the election by several months.

Meanwhile, there has been widespread speculation in Pakistan that elections may be delayed even beyond February. The opposition party led by former premier Imran Khan says there are plans to delay polls as Khan’s popularity, even from behind bars, grows.

Analysts have said any delay in the election could fuel public anger and add to uncertainty in the nuclear-armed nation.

The last general election in July 2018 was won by the party of the cricketer-turned-politician Khan, who was sworn in days later as prime minister for the first time.

Khan has been at the heart of political turmoil since he was ousted as prime minister in a no-confidence vote last year, raising concern about Pakistan’s stability. He has since been convicted and jailed in a graft case, following which he has been barred from taking part in any election for five years.

Khan has accused the powerful military, which has ruled Pakistan intermittently since independence in 1947, of being responsible for his ouster. The military has denied the charge.

In addition to the legal issues that could crop up if the vote is delayed, the side-lining of Khan, the country’s most popular leader according to polls, will cast doubt over the credibility of the elections.

Arab-Islamic ministerial committee meets at UN headquarters to discuss Gaza war

Updated 30 November 2023

Arab-Islamic ministerial committee meets at UN headquarters to discuss Gaza war

  • Meeting led by Saudi Foreign Minister Prince Faisal bin Farhan
  • Ministers call for lasting peace, implementation of two-state solution

RIYADH: A ministerial committee assigned by the Joint Arab-Islamic Extraordinary Summit held a meeting on Wednesday at the UN headquarters in New York, the Saudi Press Agency reported.

The meeting was led by Saudi Foreign Minister Prince Faisal bin Farhan and attended by representatives from China, Qatar, Jordan, Egypt, Palestine, Turkiye, Indonesia, Malaysia and the UAE.

The agenda focused on recent events in Gaza, including the outcomes of the humanitarian truce for Palestinian prisoners and efforts to achieve a ceasefire.

The meeting underscored the role of the UN Security Council’s permanent members in protecting civilians and enforcing international humanitarian laws, and highlighted the need to establish secure channels to allow urgent humanitarian aid to enter Gaza.

The ministers reiterated their call for lasting peace through the implementation of resolutions supporting a two-state solution and the creation of an independent, sovereign Palestinian state based on 1967 borders, with East Jerusalem as its capital.

The committee also urged the global community to consistently apply international legal and moral principles, and to protect Palestinians in Gaza and the occupied West Bank from the Israeli army and violent illegal settlers.

Pakistan PM in Dubai to attend World Climate Action Summit under COP28

Updated 30 November 2023

Pakistan PM in Dubai to attend World Climate Action Summit under COP28

  • Kakar plans to use the conference to call for early operationalization of loss and damage fund
  • There is no consensus between governments yet on who will pay for fund, where it will be located

ISLAMABAD: Caretaker Prime Minister Anwaar-ul-Haq Kakar arrived in Dubai on Wednesday where he will attend the World Climate Action Summit being held this week during the United Nations Climate Change Conference, or COP 28.

World leaders, business luminaries and civil society members are descending on Dubai this week for the opening of the United Nations’ annual climate change conference (COP28), which will run from Nov. 30 to Dec. 12 and look to address some of the most-pressing issues related to what experts say is a rapidly accelerating climate crisis.

Pakistan, one of the most vulnerable nations to climate change, has set up its own pavilion and will use the conference to remind wealthy countries of their “crucial” responsibility in supporting climate-vulnerable nations and the need for “equity and justice” in global climate policies, the planning ministry in Islamabad said in a handout last week.

Pakistan Caretaker Prime Minister Anwaar-ul-Haq Kakar (left) is being received by the Minister for Justice of the United Arab Emirates, Abdullah Sultan bin Awad Al Nuaimi and Pakistan Ambassador to the UAE, at Dubai's Al-Maktoum International Airport on November 29, 2023. (Photo courtesy: PMO)

Last year’s summit in Egypt came on the heels of record floods in Pakistan that killed over 1,700 people and caused more than $30 million in damages to the economy. This year’s conference comes as Pakistan, while only contributing 0.9 percent to global greenhouse gas (GHG) emissions, remains one of the most vulnerable countries to the impacts of climate change.

A deal to create a “loss and damage” fund was hailed as a breakthrough for developing country negotiators, headed by Pakistan, at COP27 in Egypt last year, overcoming years of resistance from wealthy nations. But since the summit, governments have struggled to reach consensus on the details of the fund, such as who will pay and where the fund will be located.

“The Prime Minister will head the Pakistani delegation at the 28th Conference of Parties,” Kakar’s office said in a statement after he was received at Dubai’s Al-Maktoum Airport by UAE Minister for Justice Abdullah Sultan bin Awad Al Nuaimi, Pakistan’s ambassador to the UAE and other diplomatic staff.

“The Prime Minister will attend the World Climate Action Summit on December 1 and 2.”

Kakar plans to use the conference to call for the early operationalization of the loss and damage fund and argue for the inclusion of developing countries in the fund, not just least developed states.

A special UN committee tasked with implementing the fund met for a fifth time in Abu Dhabi earlier this month, following a deadlock in Egypt last month, to finalize recommendations that will be put to governments when they meet in Dubai next week. The goal is to get the fund up and running by 2024.

Prior to arriving in Dubai, the prime minister was in Kuwait where he signed ten major investment deals. Earlier this week he also signed multibillion dollar investment and bilateral cooperation agreements with the UAE.

UN chief urges world not to look away from ‘epic humanitarian catastrophe’ in Gaza

Updated 30 November 2023

UN chief urges world not to look away from ‘epic humanitarian catastrophe’ in Gaza

  • Says “far greater” number of children killed in Gaza in weeks than total number killed in any conflict since he became secretary-general.
  • Saudi Foreign Minister Prince Faisal bin Farhan says temporary truce not enough, reiterates calls for a permanent cease-fire

NEW YORK CITY: UN Secretary-General Antonio Guterres said on Wednesday that a “far greater” number of children have been killed by Israel in Gaza in a matter of weeks during the current conflict than the total number of children killed “during any year, by any party to a conflict since I became secretary-general.”

The people of Gaza are in the midst of “an epic humanitarian catastrophe before the eyes of the world. We must not look away,” he added.

As he welcomed the ongoing, last-minute negotiations taking place in an attempt to extend the truce in the war, Guterres once again stressed the need for “a true humanitarian ceasefire.”

Speaking during a meeting of the Security Council, he said it is imperative that the people of the region are given “a horizon of hope” in the form of efforts to move in a “determined and irreversible” way toward a two-state solution.

“Failure will condemn Palestinians, Israelis, the region and the world to a never-ending cycle of death and destruction,” he added.

The high-level Security Council meeting, which took place on the annual UN-organized International Day for Solidarity with the Palestinian People, was chaired by Chinese Foreign Minister, Wang Yi. China holds the rotating presidency of the 15-member council this month.

“We should work toward a comprehensive and lasting ceasefire with the greatest urgency and as the utmost priority,” Wang said.

“What happened between Palestine and Israel over the decades shows, time and again, that resorting to military means is definitely not a way out.”

He added that China hopes the pause in military operations over the past few days will not prove simply to be a brief hiatus before a new round of violence, warning that “resumed fighting would only, most likely, turn into a calamity that devours the whole region.”

Saudi Arabia’s foreign minister, Prince Faisal bin Farhan, lamented the lack of any international mechanism for ensuring accountability for actions during the war, and the Security Council’s inability to take any steps to prevent Israeli violations of the rules of war and international law.

He told council members that the Nov. 11 summit in Riyadh adopted a resolution that reflected the will of Arab and Islamic peoples to “stem the bloodshed, deliver assistance, put an end to violations, overcome this unjustified suffering in Palestine, and stand with the Palestinian people to achieve their legitimate demands to take back their occupied territory and establish an independent state.”

Prince Faisal called for the ongoing implementation of Security Council Resolution 2712 and for efforts to build on it to achieve “a comprehensive and immediate ceasefire.” The resolution, adopted by the council on Nov. 15, calls “for urgent and extended humanitarian pauses and corridors throughout the Gaza Strip … to enable … full, rapid, safe and unhindered humanitarian access.”

Israel’s representative to the UN, Gilad Erdan, accused the foreign ministers “of some Arab countries” of coming to New York to support a “terror organization that aims to annihilate Israel.”

He equated calls for a ceasefire with support for Hamas and its “continued reign of terror” in Gaza. “Don’t you see the contradiction here?” Erdan asked council members. “Calling for both a ceasefire and peace is a paradox.” He added that “more food, water and medical supplies will not bring us closer to a solution.”

Prince Faisal asked the council: “What will help us reach a solution, according to Israel? More bloodshed? More death?”

Urging Israel to heed Arab calls for peace, he added: “The Kingdom of Saudi Arabia presented an Arab peace plan in 1982. We also had the Arab Peace Initiative in Beirut in 2002. And the PLO (Palestine Liberation Organization) recognized the State of Israel in 1993.

“Where is the Israeli peace plan? Where is the Israeli recognition of the State of Palestine? We are peace-loving nations and peace has always been our strategic choice, but we also want it to be the choice of Israel as well.”

Prince Faisal said the time has come for the world to recognize an independent Palestinian state, and called for Palestine to be granted full membership of the UN. Currently it has observer state status.

He also called for an international peace conference to take place, under the auspices of the UN, with the aim of developing and implementing a two-state solution.

He told reporters at the UN headquarters in New York: “The danger is that if … this truce expires we will return to the killing at the scale that we have seen, which is unbearable. So we are here to make a clear statement that a truce is not enough. What is needed is a ceasefire.”

The prince added that a glimmer of hope can be found in the fact that public opinion worldwide is beginning to shift as people become increasingly aware of “the unfolding catastrophe” in Gaza, and that violence is not the answer.

Asked whether Arab nations should help ease the current pressure on Palestinians and their suffering by taking them in as refugees, he said they “do not want to leave their land. We won’t encourage them or force them to leave their land and we are not going to work with anyone who has that agenda.

“The Palestinians have a right to their land, and they have a right to live in safety and security and dignity on their land, and that is what we will push for and work toward.”

Riyad Maliki, the Palestinian foreign minister, told the Security Council that anyone who is still not sure about whether they oppose the war in Gaza or the need for it to end should “check their humanity.”

The current truce must become “a permanent ceasefire,” he said, because “the massacres cannot be allowed to resume.”

He added: “Our people are faced with an existential threat. Make no mistake about it. With all the talk about the destruction of Israel, it is Palestine that is facing a plan to destroy it, implemented in broad daylight.”

The US ambassador to the UN, Linda Thomas-Greenfield, said her country has urged Israel “to take every possible measure to prevent civilian casualties as it exercises its right to safeguard its people from acts of terror.” The use of civilians as human shields by Hamas “does not lessen Israel’s responsibility,” she added.